Correlation Between Ford and FutureTech
Can any of the company-specific risk be diversified away by investing in both Ford and FutureTech at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ford and FutureTech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and FutureTech II Acquisition, you can compare the effects of market volatilities on Ford and FutureTech and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ford with a short position of FutureTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and FutureTech.
Diversification Opportunities for Ford and FutureTech
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ford and FutureTech is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and FutureTech II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FutureTech II Acquisition and Ford is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ford Motor are associated (or correlated) with FutureTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FutureTech II Acquisition has no effect on the direction of Ford i.e., Ford and FutureTech go up and down completely randomly.
Pair Corralation between Ford and FutureTech
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the FutureTech. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 21.58 times less risky than FutureTech. The stock trades about -0.18 of its potential returns per unit of risk. The FutureTech II Acquisition is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2.00 in FutureTech II Acquisition on September 13, 2024 and sell it today you would lose (0.25) from holding FutureTech II Acquisition or give up 12.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 36.36% |
| Values | Daily Returns |
Ford Motor vs. FutureTech II Acquisition
Performance |
| Timeline |
| Ford Motor |
| FutureTech II Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Ford and FutureTech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and FutureTech
The main advantage of trading using opposite Ford and FutureTech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, FutureTech can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in FutureTech will offset losses from the drop in FutureTech's long position.The idea behind Ford Motor and FutureTech II Acquisition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.
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